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In an unusual stance, investors owed millions of dollars are battling federal regulators and a court-appointed receiver over whether a Utah company was a Ponzi scheme and insolvent when it was taken over in December of 2011.

An attorney for investors argued in U.S. District Court on Monday that a Fountain Green company called Management Solutions Inc. was managed improperly but that its assets and cash flow were sufficient to keep the operations going and pay back investors.

"There will be no evidence of insolvency," said Robert Clark, attorney for the McDermott family of investors and their companies.

Judge Bruce Jenkins is presiding over the weeklong hearing over the business practices of Management Solutions Inc., a company primarily involved purchasing, improving and reselling apartment buildings. The question of whether the company operated fraudulently has bearing on much how investors might get back once its holdings are liquidated.

The Securities and Exchange Commission sued the company and owners Wendell and Allen Jacobson, alleging they were only able to pay promised rates of return of 5 percent to 8 percent a year by bringing in new investor money to pay off obligations to more mature investors, or what's known as a Ponzi scheme.

SEC accountant Scott Frost testified Monday that Wendell Jacobson used his control of all entities to mingle funds, then used that pool to pay investors regardless of whether their investments had turned a profit.

"It appears [the pool] was used for anything Wendell wanted to use it for," including personal expenses, said Frost.

But under cross examination, Frost admitted that the properties held by the Jacobson entities may have had sufficient market value to pay all obligations.

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